With global unit shipments topping 300 million every quarter, the smartphone has quickly risen as the world's most important personal device. It matters to investors, too, as smartphone brand dominance can also lead to complementary sales of software services, not to mention a growing ecosystem of devices such as smartwatches and headphones. So while smartphone makers are vague on specific sales numbers, which phones are selling best can help investors make decisions on which stocks they want to own.
Podium finishers in the United States
According to reports from Counterpoint Research, Apple (NASDAQ:AAPL) remained the top-selling smartphone maker in the U.S., with 39% of the total market share as of the third quarter. Despite calls to the contrary from many analysts, Apple CEO Tim Cook said the $1,000 iPhone X was its best-selling model during the first, second, and third quarters of the 2018 fiscal year, with no specific comment on whether the iPhone 8, 8 Plus, or X was the winner during the seasonally slow fiscal fourth quarter.
That means premium phones were king in 2018, as the No. 2 smartphone maker in the U.S., Samsung (NASDAQOTH:SSNLF), made most of its hay off the Galaxy S9 and S9+. The bigger-screened Galaxy Note 9 came out in August, so most of Samsung's 25% market share in the third quarter was made up of the smaller but still spendy S9 phones, with their $720 starting price.
Rounding out the top sellers is LG Electronics (NASDAQOTH:LGEAF) and its flagship V40 ThinQ phone. According to Counterpoint Research, LG finished the third quarter with 17% of U.S. market share, up from 14% during the fourth quarter of 2017.
A shakeup overseas
Globally, the picture looks a bit different. Samsung holds the top spot in worldwide sales, and Apple had been in second place for some time, but Chinese smartphone maker Huawei supplanted Apple starting in the second quarter of 2018. According to research group IDC, Apple's global market share was at 13.2% at the end of the third quarter, compared with 12.4% a year ago. Thus, Huawei's advance has been mostly at Samsung's expense; the South Korean manufacturer dropped to 20.3% from 22.1% a year ago, while Huawei increased to 14.6% from 10.4%.
Huawei is a private company, so there's no way for investors to own a slice of the Chinese upstart. But the company that's growing at the expense of Samsung should be a signal to investors to stay away from the Galaxy phone maker. As for Apple, sticking with its premium image has been a winning strategy the past few years, as rising average iPhone selling prices have done the most work toward growing revenue numbers. However, there's more to the story for Apple -- and possibly the smartphone industry -- as global smartphone sales growth slows down overall.
What's really at stake?
While fretting over numbers of units sold has been an investor concern for years, Apple is signaling that it's time to rethink the metric. Starting with the first quarter of the 2019 fiscal year, the company will no longer disclose how many iPhones were sold. A new number will take its place: gross profit margin on the services segment, which grew to become the company's second largest money-maker in 2018.
While devices sold is still important, and Apple will report gross margins for all of its reportable segments, including iPhones, the shift could be a healthy one for Apple investors and other smartphone companies. Device use leads to software service use, which equates to recurring revenue -- usually a much higher profit margin concern. Thus, 2019 could end up being a pivotal year in the evolution of hardware makers like Apple, as they divert shareholder interest to new sources of revenue.
Nicholas Rossolillo and his clients own shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.